The G7’s global corporation tax: bringing Big Tech to heel

The G7 group of nations has agreed to potentially historic changes in the way multinational companies are taxed. Who wins and who loses?

Joe Biden playing whack-a-mole
(Image credit: Joe Biden playing whack-a-mole)

What exactly has been agreed?

For a century and more, multinational companies have paid tax in the jurisdiction where they are based. That’s the simplest system. But as the world economy globalised, it has increasingly fostered a complex web of ownership structures, tax havens and other jurisdiction-hopping that lets profit-making machines pay nugatory corporate taxes in places where they do lots of business. That strikes many people as unfair. There are two parts to the changes agreed by the G7. First, the 100 biggest global companies with profit margins of at least 10% will henceforth have to pay tax on 20% of profits (above the 10% margin) in the countries where they make sales, rather than where they are legally registered. Second, there’ll be an agreed global minimum rate (for countries that agree) of “at least” 15% corporation tax on overseas profits, together with ancillary measures that wipe out the advantages of shifting profits to low-tax jurisdictions. The details have yet to be thrashed out, and the deal faces a fierce battle to get through national legislatures. But these are potentially historic changes.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Simon Wilson’s first career was in book publishing, as an economics editor at Routledge, and as a publisher of non-fiction at Random House, specialising in popular business and management books. While there, he published Customers.com, a bestselling classic of the early days of e-commerce, and The Money or Your Life: Reuniting Work and Joy, an inspirational book that helped inspire its publisher towards a post-corporate, portfolio life.   

Since 2001, he has been a writer for MoneyWeek, a financial copywriter, and a long-time contributing editor at The Week. Simon also works as an actor and corporate trainer; current and past clients include investment banks, the Bank of England, the UK government, several Magic Circle law firms and all of the Big Four accountancy firms. He has a degree in languages (German and Spanish) and social and political sciences from the University of Cambridge.